Given the recent Republican sweep of the federal government,
it seems likely the lawmakers will eventually succeed if they remain focused on
the effort. Just this week Senator Orrin Hatch, R-Utah, well known for his work
on pension and retirement issues, introduced a joint resolution in the Senate “disapproving
the rulemaking,” matching a previous
move in the House.

Their concerns, broadly stated, are that small businesses
will be discouraged from offering their own retirement plans to employees, and that
employees put into state-run plans will not have the protections of the
Employee Retirement Income Security Act (ERISA) and will have limited control
over their retirement savings. It remains to be seen how such a seemingly pro-ERISA stance will be squared with the parallel effort among GOP lawmakers and the executive branch to overturn the DOL fiduciary rule, which would have the effect of broadly expanding
ERISA’s protections to IRAs.

As the Republican Congress seeks its footing, there are still many who are arguing in
favor of the Obama-era rules—and not just opposition Democrats. Those standing
in favor of state-based IRA programs include many retirement plan advisers and other
service providers.

According to research provided by Segal Consulting, one
powerful argument they are sharing with Congressional leaders is that state-based
IRA programs can allow private sector workers to enhance their retirement
security while the state also saves on Medicaid costs because fewer people would need to rely on Medicaid. The savings on Medicaid,
some argue, can even go a long way to offset the cost of the IRA programs in the
first place.

“With retirement savings falling short of what many workers
need, several states have taken steps to establish workplace individual
retirement account programs for workers who do not have access to an employer
sponsored retirement plan,” the firm explains. “These states are also asking
how a population better prepared for retirement would affect public safety-net
programs. Of most interest, given its growing presence in state budgets, is
Medicaid, where there are clear potential savings.”

NEXT: Serious savings
for the states

Segal Consulting conducted a review of all 50 states and the
District of Columbia “to estimate the impact of expanded retirement savings by
individuals not currently participating in a retirement plan on future Medicaid
expenditures.” The analysis clearly showed a positive correlation between
increased retirement savings, “sufficient to remove a percentage of currently
vulnerable households from the poverty rolls by the time they retire, and a
related reduction in Medicaid spending.”

Segal argues that “every state had an estimated reduction in
state Medicaid expenditures resulting from increased retirement savings from
the first 10 years of the plan.”

“Fifteen states would save more than $100 million each, with
total projected savings approaching $5 billion,” the firm suggests. “The
savings ranged from $11 million in Mississippi to $604.7 million California.”

“This study shows states could realize meaningful savings on
Medicaid spending when a retirement savings plan is available
to all private sector workers,” agrees Cathie Eitelberg, senior
vice president and director of public sector consulting at Segal. “The majority
of jurisdictions have yet to consider this option, but should at least start to
evaluate the feasibility of such a program from a cost/benefit perspective.”